Here’s the Biggest Danger to Your Retirement That Most Forget

Here’s the Biggest Danger to Your Retirement That Most Forget luchunyu /

It’s obvious in retrospect. All you have to do is go online and look at any financial planning calculator. None of them factor in the rising cost of healthcare. And those costs are rising each and every day.

Most financial planners have a goal to replace about 70 percent of income with Social Security retirement payments and income generated from a retirement portfolio. But for many Americans that won’t be enough to cover the rising costs of healthcare, especially in the last years of life.

“The plan you have today may not be the one you want to carry into retirement, because it may be cost-prohibitive to do so,” certified financial planner Ron Carson, founder and CEO of Carson Wealth Management Group, told CNBC.

The Staggering Cost of Healthcare

Fidelity recently estimated that healthcare costs for a “healthy” couple will be around $275,000 a year, not including over the counter medications and long term care (LTC).

The cost of long term care is rising rapidly too. In 2017, Fidelity estimated that long term care expenses will require $130,000 for the average couple and that 69 percent of Americans will need long term care at some point in their lives.

That estimate doesn’t include the roughly $10,000 in out-of-pocket expenses for the primary caregiver — who is usually a spouse — that I mentioned when writing about what to do when you don’t have enough money to retire.

Long Term Care Costs

Genworth Financial estimates that the median annual costs for long term care is $49,192 per year, with options ranging from adult day care to a private room in a nursing home:

  • Adult Day Care (5 days/wk)                $18,200
  • Assisted Living (one-bedroom)          $45,000
  • Homemaker Services (44 hrs/wk)     $47,934
  • In-Home Health Aide (44 hrs/wk)     $49,192
  • Nursing Home (semi-private room)  $85,775
  • Nursing Home (private room)            $97,455

So by my reckoning, that’s an additional $415,000 that a retired couple needs to plan for in retirement.

Ignoring these potential expenses breaks the two rules of the secret to wealth building. After a lifetime of building wealth, it becomes vulnerable when you need it most.

Love is Not Enough

Most Americans will rely on the “I Love You Plan,” says my friend, Lyn Rowe, CFP. Rowe specializes in long term and short term care solutions for retirees and their loved ones.

Rowe used to say that when couples were asked about their plan for long term care, usually they would look at each other, and say that if one of them got sick, the other would care for them. Or their family would take care of them. But that ignores the reality that older adults often have a hard enough time taking care of themselves, let alone another person. At the very least a family member — or more likely several family members — have to take turns providing care.

While this arrangement is not uncommon, it puts an incredible strain on the physical, emotional and financial resources of families who rely on the “I Love You Plan.”

What are Some Alternatives?    

The first and most obvious thing to do is ask yourself what your plan is. Ask your spouse. Ask your father. Ask your mother. Long term care is a family matter. And you don’t just have to find long term care solutions for yourself. You also have to think about those solutions for your loved ones as well. Not just to protect your portfolio, but because you really do love them.

There are several options for healthcare that can help at any age:

Option #1: Buy a Long Term or Short Term Healthcare Policy

This is the most direct and least complicated solution to long term healthcare needs. Like most things when it comes to building wealth, the earlier you start, the bigger bang you get for your buck. Buying long term care insurance before age 55 can save you a lot. Estimates for the cost of long term care insurance can vary widely depending on how much insurance you want to purchase, but expect premiums to range from $2,000-$5,000 per year.

Option #2: Create A Health Savings Account

You can save up to $6,850 in pre-tax dollars per year in a health savings account, or HSA, to cover “deductibles, copayments, coinsurance, and some other expenses,” according to Healthcare.Gov. While this won’t fully cover your retirement healthcare needs, it can save you money in the long run, allowing you to afford additional coverage.

Option #3: Linked Benefit Policies

Linked benefit policies are hybrid policies that have both life insurance benefits and can provide cash for qualified long term health care expenses. The advantage is that they are generally less expensive than long term care policies and if you don’t need long term care, you still have a death benefit. The downside is that they usually require a lump sum or a small number of annual payments, so you’ll need cash to fund it.

Option #4: Life Insurance with Chronic Illness or Long Term Care Riders

These are traditional life insurance policies that can be used for permanent conditions that require long-term care. If you have whole life insurance already you can ask about adding chronic illness or long-term care riders.

Option #5: Self-Insurance

This is the most difficult of all the options, but if you have the knowledge and the discipline to manage money as well as an insurance company, perhaps you can save that additional $415,000 for healthcare costs in retirement on your own.

Option #6: Pre-paid Home Health Care

There are a number of companies that offer pre-paid, in-home healthcare services in bundles of hours just like cellular service. Usually, they rely on a network of independently operated home healthcare providers to deliver service.

In the end, it pays to be proactive. After you’ve spent a lifetime living frugally, investing wisely and building wealth with the Safe Haven Strategy, don’t let unplanned healthcare costs derail your retirement.

John Ransom

John Ransom is a politics and economics writer. Previously he was a regular contributor to the Daily Caller and Finance Editor at His work has appeared on The,, the LA Business Journal, and other outlets. Ransom has appeared with Steve Forbes on the Money Show, Fox Business with Stuart Varney and Charles Payne, and regularly hosted his own syndicated radio show in 25 cities on the Wall Street Business Network, a Salem Network.